Sell or dispose of an asset

You register the sale of an asset. When generating the journal entries, Profit will also register the sale of the asset. The sale of an asset also covers the disposal of the asset. If an asset is disposed of, the residual value is generally zero. This could be because the asset has reached the end of its life span or because the asset has been heavily damaged.

Description

For a sale, Profit can generate the following journal entries. Once the journal entries have been generated, you can no longer change the sale data.

• The disposal of the asset is included in the next depreciation journal entry. In this journal entry, the entire investment is written off in the investment account.
• The deprecations up until the current financial year are depreciated in the depreciation account. The difference between the investment and the depreciation account amounts is then written to the specified account.
• If the asset has a subsidy for which the amount is released with an equalisation account, then the balance (subsidy - released amount) is eliminated.

  Note: 

  In Profit, you can write off the depreciations for the current financial year manually. This is not the case for previous financial years. Because of this, Profit writes off the depreciations for the previous financial years automatically and you only have to write off the depreciations for the current financial year yourself.

Journal entry for sale of asset

When an asset is sold, contra entries are made in a number of general ledger accounts. Before this is done, the remaining depreciation is first calculated and processed (over the period still to be calculated up until the depreciation end date). The journal entry for the depreciation is created as described previously. After the remaining depreciation has been processed, a journal entry is created with the following entry lines:

The 'purchase value' and 'additional costs' fields are added together and reduced by the value in the 'reinvestment reserve' field (for the fiscal entry method) or the 'book profit previous asset' field (for the commercial entry method). An entry is made for the total amount to the account:

• Purchase value: the account is credited if the amount is positive, otherwise it is debited.

An entry is made for the total amount of the Depreciation fields plus the vervroegde afschrijving fields in the account:

• Depreciation: If the amount is positive, the account is debited, otherwise it is credited.

The sales amount is entered from the invoice to an asset sales suspense account. Once again a contra entry must be made for this amount. The amount from the Sales amount field is thus entered on the account:

• Sales suspense account: A positive amount is debited and a negative amount (for example, disposal or demolition costs) is credited.

The above entries are made in one journal entry. The balance of these entries is the book profit or book loss. If, when you enter the sale, you indicate that there is no replacement or there is a loss, then the result is entered:

• In case of profit: On the profit on sale account
• In case of loss: On the loss on sale account

If when you enter the sale, you indicate that a general replacement reserve must be formed then the result (if there is a profit) is entered on the account:

• Replacement asset reinvestment reserve

If when you enter the sale, you indicate that there is a replacement asset then the result (if there is a profit) is entered on the purchase value account of the replacement asset. Furthermore, this amount is recorded in the appropriate field of the replacement asset and the depreciation period amounts for the replacement asset are recalculated.

Journal entry for subsidy release

If the asset has a subsidy for which the amount is released by means of an equalisation account then the balance (subsidy - released amount) is eliminated. The following entry is made for this balance:

or:

The subsidy equalisation reserve account is debited and the subsidy released account is credited.

Procedure

• Record the sale or disposal of an asset
• Generate fixed assets journal entries